Builders: ‘Everything’ on the Table to Avoid Fiscal Cliff

As Washington remains abuzz about the federal budget, captains of industry are finding themselves in the middle of an interesting tug of war. The Journal last week profiled Honeywell CEO David Cote, who says he’d be willing to pay income taxes of nearly 40% if it meant avoiding the fiscal cliff.

The home-building industry, it seems, feels the same way: Raise our taxes, cut benefits–anything to avoid the fiscal cliff.

In a letter last week to the President Barack Obama and to House Speaker John Boehner, the chief executives of 18 large builders implored Washington to do whatever it takes to avoid the fiscal cliff. The letter, produced by building-industry lobbying group the Leading Builders of America, highlights just how worried the builders are that the fiscal cliff could tip the country back into recession and end the rally that builders have been enjoying over the last year.

“We support a comprehensive agreement in Washington to avoid the fiscal cliff that includes revenue increases (including tax rate adjustments) together with meaningful entitlement reforms,” the letter read. “We believe that taking ‘no action’ or failing to reach an agreement will shake the confidence of American consumers and businesses alike, and may derail the beginning of economic recovery.”

The letter is notable for a number of reasons. First, the builders, who have, over the years been cooperative with administrations from both parties and elected officials from an array of political views, tend to skew towards supporting Republicans. The GOP platform on resolving the budget deficit has been, at various times, to completely oppose any tax increases, and later, to minimize tax increases and pair them with cuts to other parts of the budget. On Monday, the Journal reported a breakthrough of sorts in the talks, as GOP congressional leader John Boehner proposed raising taxes on millionaires to help avoid the cliff.

Indeed, in addition to the CEOs of KB Home Lennar Corp Hovnanian EnterprisesToll Brothers and others, the letter’s signatories also include Bob Perry of Houston’s Perry Homes, an important Republican fundraiser who gave millions of his own personal wealth to a super PAC supporting the campaign of Mitt Romney.

The letter is also notable for what’s not in it: any mention of changes to the mortgage-interest deduction.

Earlier this month, President Obama weighed in on that issue, implying that the deduction could be threatened for middle-class people if taxes aren’t allowed to rise on the wealthy. Lobbying groups representing both builders and real-estate agents have urged Congress to minimize cuts to the mortgage-interest deduction in order to preserve the housing market’s momentum.

But Ken Gear, executive director of the Leading Builders, the group that produced the letter, said that even the deduction isn’t sacred.

“The builders’ position is that everything should be on the table,” Mr. Gear said in an interview with Developments. “The reality of the economy right now caused our members to say it. If they go over the cliff, and they don’t solve these issues once and for all, the damage will be deep.”